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Capitalism: Begun the Trade War has
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  • WASHINGTON – Today, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced that it will be adding Huawei Technologies Co. Ltd. and its affiliates to the Bureau’s Entity List. This action stems from information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest. This information includes the activities alleged in the Department of Justice’s public superseding indictment of Huawei, including alleged violations of the International Emergency Economic Powers Act (IEEPA), conspiracy to violate IEEPA by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of those alleged violations of U.S. sanctions.

    The sale or transfer of American technology to a company or person on the Entity List requires a license issued by BIS, and a license may be denied if the sale or transfer would harm U.S. national security or foreign policy interests. The listing will be effective when published in the Federal Register.

    “This action by the Commerce Department’s Bureau of Industry and Security, with the support of the President of the United States, places Huawei, a Chinese owned company that is the largest telecommunications equipment producer in the world, on the Entity List. This will prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” said Secretary of Commerce Wilbur Ross. “President Trump has directed the Commerce Department to be vigilant in its protection of national security activities. Since the beginning of the Administration, the Department has added 190 persons or organizations to the Entity List, as well as instituted five investigations of the effect of imports on national security under Section 232 of the Trade Act of 1962.” Additions to the Entity List are decided by the End-User Review Committee which is comprised of officials from the Department of Commerce, Department of Defense, State Department, and Department of Energy. Under § 744.11(b) of the Export Administration Regulations, persons or organizations for whom there is reasonable cause to believe that they are involved, were involved, or pose a significant risk of becoming involved in activities that are contrary to the national security or foreign policy interests of the United States, and those acting on behalf of such persons, may be added to the Entity List.

    The Bureau of Industry and Security’s mission is to advance U.S. national security and foreign policy objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership. BIS is committed to preventing U.S.-origin items from supporting Weapons of Mass Destruction (WMD) projects, terrorism, or destabilizing military modernization programs.

  • What are actual main US demands?

    First. Allow US banks and corporations to openly buy best Chinese companies using freshly made dollars (aka get stuff for exactly $0). Main US demand - for inexperienced people this is called "opening your economy for investors".

    Second. Drop any independence in intellectual property area, allow US patents to work at Chinese soil, and allow US corporations to buy own any local patents. This also goes with changing legal system to make it controlled by international organizations (read - US and EU). Same goes with shady copyright properties.

    Third. Do not pretend to obtain EU/US part of oil and gas. Contrary to common believe no such thing as market of oil and gas exist, all marketable oil/gas are very small chunk mostly used to legalize necessary price moves.

  • Losing Huawei as a customer could cost US tech companies $11 billion

    China's Huawei bought $70 billion worth of components and parts last year from 13,000 suppliers. Of that, about $11 billion was spent on products from dozens of US businesses, including computer chips from Qualcomm (QCOM) and Broadcom (AVGO), as well as Microsoft (MSFT) software and Google's (GOOGL) Android.

    That revenue is now threatened by the Trump administration's decision to place Huawei on a list of foreign firms barred from receiving components from US exporters without a license.

    https://www.cnn.com/2019/05/17/tech/huawei-us-ban-suppliers/index.html

    Rural America feels the sting of Trump's China trade war

    Commerce Secretary Wilbur Ross said Thursday on Fox Business that the administration is willing to work with small and rural carriers to ensure they will not be forced to "rip everything out" that is made by Huawei under the order. And White House officials have said they will be taking input from businesses about how to structure the implementation of the new rules.

    But being unable to purchase new Huawei gear could still leave those carriers stuck with aging infrastructure that can't be replaced if it malfunctions, degrades or is destroyed by the weather, said Bennet. "You wouldn't be able to make a 911 call if the network is down," she said, particularly in rural areas where bigger carriers don't offer any service at all.

    About 2.1 million workers in aircraft manufacturing, beer brewing, tobacco and dozens of other industries stand to be affected by the trade war, according to an April study by the Brookings Institution. The impact would be evenly distributed between red and blue counties, Brookings found.

    But a similar study by Axios last week found that Trump's recent escalations could wind up affecting more than five times as many workers. The hardest hits will affect industries based in "rural, deeply red, already-struggling parts of the country," including miners in Texas, furniture makers in North Carolina and sawmills in Alabama. In the tech industry, as many as 1 million jobs are at risk due to the trade war in states such as Texas, Florida, Illinois and Pennsylvania, according to the Consumer Technology Association.

    https://www.cnn.com/2019/05/19/politics/china-trade-war-trump-rural/index.html

  • Taiwan Motherboard makers are worried

    China has a significantly higher population than the U.S. Half of global motherboard shipments go to China; losing access to that market would obviously be devastating.

    China actually can make first move here after short and fast preparation of their own domestic manufacturers that are rising around 30-50% YoY, but are still small compared to Taiwan vendors. May be we will see few factories seized.

    Few weaker manufacturers can fall within next 2-3 years, and most probably we will have mergers to finally have 1-2 total Taiwanese manufacturers.

  • Why the Trade Talks failed, Comments by Mark Chia

    This is why the trade talks failed and it has nothing to do with China reneging on agreed terms. That's bullshit put out by Trump, and spread by the US controlled global MSM. Even SG correspondent in Washington DC, Charissa Yong repeated that barefaced lie. I doubt she bothered to ask the Chinese for their take.

    In the interview Liu He gave to the Chinese language media in Washington, he listed 3 conditions for the trade deal :

    "In order to reach an agreement the U.S. must remove all extra tariffs, set targets for Chinese purchases of goods in line with real demand, and ensure that the text of the deal is “balanced” to ensure the “dignity” of both nations, Liu said. His conditions were echoed in local media coverage on Monday, including an analysis by state-run news agency Xinhua."

    On the first point, Trump wanted to keep the 10% tariffs on 200 billion dollars Chinese goods. China wanted all tariffs to be removed.

    On the second point, Xi was reported to have offered to increase Chinese imports including chips by 1 trillion dollars over 6 years. Trump wanted the 1 trillion increase to be over 3 years. There's no way China needs to increase the imports by 330 billion dollars a year, especially after the chips industry refused to be part of the increased imports.

    Third, the so called balanced text is really the enforcement mechanism which allows the US to determine and decide at its sole discretion whether China has adhered to the trade deal. In other words, America wanted to be the prosecutor, judge, jury and executioner at the same time.

    Apparently, the US listed 13 demands, most of which undermine and usurp China's Economic sovereignty and chosen path of economic development. There's no way China will agree to those demands. See the list of 13 demands in Chinese. This is reminiscent of the 13 demands from the Japanese empire to ( China's ) Yuan Shikai regime.

    Additional comment by Charles Chung:

    There was a 13 point demand from the US side that outlined what was being discussed in the trade talks. That had been circulated and debated in Hong Kong for a while. Fulfilling those demands basically means allowing the US to govern China through structural changes to American agenda and incriminating China for whatever they termed as IP (theft?),forced (?) tech transfers and trade imbalances .... The Chinese side felt that the Americans were insane and insincere because the demands were unreasonable. China would never give up sovereignty of the Chinese nation to Americans for the kind of structural changes that they want ...

    According to Bloomberg, XJP recently said it would be foolish for one country to force unwanted changes on the other. The US side, using their powerful brainwashing media, claimed the Chinese reneged ..... But after reading the 13 point demand (the Chinese version published in Hong Kong), I don't think the Chinese could have agreed to any of those and that's why the talks dragged on .....

    Japan's 21 demands

    In 1914, Japan captured the German colony at Qingdao, ( China ) . In January 1915, Japan sent a secret ultimatum, known as the Twenty-one Demands, to Beijing. Japan demanded an extension of extraterritoriality, the sale of businesses in debt to Japan and the cession of Qingdao to Japan. When these demands were made public, hostility within China was expressed in nationwide anti-Japanese demonstrations and an effective national boycott of Japanese goods.
  • List of 13 demands from the US, from Chinese language news:

    China will never accept the US Ultimatum: Thirteen Overlord clauses exposed! 

    May 13, 2019     

  • AFAIK, the public has seen this supposedly draft agreement between the US and China. There is no leak, given the stakes, may be there should be. However, it appears this is no longer just a trade war, it has evolved into the beginning of a technology cold war. If there is no agreement, the world of supply chain, as we know it, is going to change. Then we will be looking at a bifurcated world, including a bifurcated Internet world, and many other things. This bifurcated world will be much more dangerous as well.

  • @ghkqn

    If you look at statistics and markets - the US had no other choice.
    Any further delay could cause big issues for their most profitable corporations.

    It is also good reason why they try to accelerate confrontation - as time plays against US, even month time is significant. They already made huge mistake by delaying rising tariffs.

    Iran stuff is element of the same thing, if US won't cut China from Iran and Iraq oil after imposing tariffs - bad things can happen.

  • VK - I agree that the US has no choice but to act now. The fundamentals are not changing when you look at the last job report. Out of the 260K added new jobs, only 3k are in manufacturing, 30k are in housing construction, and the rest is all in retail or healthcare (the US accounts for 45% of the world's expenditures on healthcare).

  • USA Today: China tariffs could force 'widespread store closures' and put $40 billion in sales at risk

    Earlier this month, the Trump administration increased U.S. tariffs on $200 billion in Chinese imports from 10% to 25%. The president has also threatened to add a 25% tariff on almost all the remaining $325 billion in goods shipped in from China.

    UBS was already anticipating more store closures and calculated 20,710 clothing stores need to close by 2026, in an April report.

    “Tariffs could cause over half of this change in one year, rather than four,” Sole wrote, adding this is just publicly traded companies and doesn’t include impact on private companies.

    https://www.usatoday.com/story/money/2019/05/20/us-china-trade-war-tariffs-could-lead-12-000-store-closings/3688010002/?fbclid=IwAR2bqGM6UsiUWeGiJUApj3f4HwXVnXVdU4HiA4QdnNKCPBl76M3icj_Rs8s

  • @jleo

    It can be also outcome Trump like to see. As Amazon and Walmart can only grow now if they destroy thousands of stores each quarter. Also both companies with help of government will form intermediary bases in Mexico and Canada where they will mark necessary Chinese products as domestic ones.

  • Yes, even bankrupt farmers are good for big Agribusiness companies. Trump made his meagre fortune buying bankrupt firesale properties, his cronies like Wilbur Ross made his fortune buying bankrupt companies. Somebody's getting rich while everyone suffers! :) :(

  • Ben Razon: And the GODS of WALL STREET have SPOKEN through its mouthpiece: THEY are NOT PLEASED. -

    ...Worse, the decision undermines the implicit point of any U.S.-China trade deal: not just to increase commerce but to stabilize relations between the world’s two most powerful nations. While tensions are inevitable, a healthy trading relationship should in theory restore ballast, reminding both sides of the benefits of cooperation and strengthening constituencies that have reason to prefer peace to war. By contrast, targeting Huawei so nakedly will only further marginalize the few moderates in the Chinese leadership and embolden hawks who see conflict as unavoidable. For ordinary Chinese, it will be hard to avoid the impression that the U.S. is simply trying to limit their economic possibilities.'
    • Bloomberg Editorial Board

    https://www.bloomberg.com/opinion/articles/2019-05-20/huawei-blacklist-trump-and-commerce-make-a-serious-mistake

    Huawei ban lifted for 90 days, ( until Trump gets to meet Xi )

    US loosens restrictions on Huawei products temporarily

    On Monday, the US Commerce Department announced a loosening of some of the restrictions the United States placed on the Chinese company last week. The restrictions made it difficult for American companies to do business with Huawei.

    Although Huawei does not do much business in the United States, the company is the sole provider of networking equipment to many rural American internet providers. Those companies have said it will take time — or may be impossible — to replace their Huawei technology with a rival's.
    The department issued a temporary general license that lets Huawei buy US goods to maintain existing networks and continue providing wireless services. The company is still banned from buying US equipment to make new products.

    https://www.cnn.com/2019/05/20/tech/huawei-commerce-department-exemptions/index.html

  • decision undermines the implicit point of any U.S.-China trade deal: not just to increase commerce but to stabilize relations between the world’s two most powerful nations.

    I laughed so loud.

  • image

    Wait one more year and it'll be very bad (add another 30-40%).

    Add here simple fact that this year Chinese NAND and DRAM suppliers come to world market, and it is two chip manufacturing areas with highest margins (if you do not count server/supercomputer grade CPUs and GPUs).

    If China will be able to further drop SSD and DRAM prices (by around 2-3 times from current) we will see full blown crisis in US.

    From my sources - Chinese DRAM and SSD suppliers increased sale around 3x in recent month compared to Taiwan counterparts.

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  • It is always useful to read smart old books

    Only conceivable basis under capitalism for the division of spheres of influence, interests, colonies, etc., is a calculation of the strength of those participating, their general economic, financial, military strength, etc. And the strength of these participants in the division does not change to an equal degree, for the even development of different undertakings, trusts, branches of industry, or countries is impossible under capitalism. Half a century ago Germany was a miserable, insignificant country, if her capitalist strength is compared with that of the Britain of that time; Japan compared with Russia in the same way. Is it “conceivable” that in ten or twenty years’ time the relative strength of the imperialist powers will have remained unchanged? It is out of the question.

    Therefore, in the realities of the capitalist system, and not in the banal philistine fantasies of English parsons, or of the German “Marxist”, Kautsky, “inter-imperialist” or “ultra-imperialist” alliances, no matter what form they may assume, whether of one imperialist coalition against another, or of a general alliance embracing all the imperialist powers, are inevitably nothing more than a “truce” in periods between wars. Peaceful alliances prepare the ground for wars, and in their turn grow out of wars; the one conditions the other, producing alternating forms of peaceful and non-peaceful struggle on one and the same basis of imperialist connections and relations within world economics and world politics.

    V. Lenin Imperialism, the Highest Stage of Capitalism

    Time after time smartest professors hired by capital told that guy is wrong, and time and time again reality showed how right he is :-)

  • From the history books...

    "AFTER ITS DEFEAT in World War II, Japan was content to take foreign inventions -- the transistor, the laser, the videotape player -- and convert them into products that it could market around the world. Japan acquired much of its base of Western technology, most of it American, perfectly legally through licensing, careful study of scientific papers and patents, and imitation. But when the U.S. wasn't willing to share, some Japanese companies simply copied with little regard for patents and other intellectual property rights that the courts have only recently begun to define in many areas of high technology. The U.S., confident of its technical superiority, ''sold out to the Japanese,'' says G. Steven Burrill, head of the high-technology consulting group at Arthur Young, a Big Eight accounting firm. ''We let them share our brain.'' Now, belatedly awake to the recognition that Japan has been eating their breakfast, lunch, dinner, and bedtime snack, American companies are stirring. IBM vs. Fujitsu over computer software, Honeywell vs. Minolta over automatic focusing, Corning Glass vs. Sumitomo Electric over fiber optics -- these are only the latest, best-publicized complaints that Japan has stolen American technology. Even as those legal battles are fought out, the copycat cliche is becoming obsolete. A series of studies financed by the U.S. government since 1984 warn that Japan has caught up with the U.S. or passed it in the development of integrated circuits, fiber optics, computer hardware engineering, and advanced materials like polymers. It is pressing hard in some areas of biotechnology, and lags primarily in computer software. Already there are signs that the Japanese, buoyed by their new prowess, have assumed the arrogance of the U.S. along with its technology."

    "A MEASURE of Japan's progress can be found in the number of patent filings in the U.S., Japan's most important export market. ..."

    "THE FACT that Americans now worry about their access to Japanese technology is an acknowledgment of Japan's new scientific competence. When the Japanese were known primarily as copycats, the flow of technology was essentially in one direction. It was also cheap. Aaron Gellman, president of a consulting firm, says that for years U.S. firms licensed technology to the Japanese without asking for a grant-back, the right to use any improvements they made. Says Gellman: ''This was very arrogant and implied that no one could improve on our technology.''"

    "U.S. scientists and companies have failed to take advantage of opportunities to tap Japanese academic research. ''What's wrong here is pure laziness,'' says Martin Anderson, an analyst with the MAC Group, a consulting firm in Cambridge, Massachusetts."

    http://archive.fortune.com/magazines/fortune/fortune_archive/1987/12/21/69996/index.htm

  • US Companies in China make more money than what the US exports to China, dwarfing the trade deficit

    $343 Billion US Sales in China $170 Billion US Exports to China

  • @jleo

    Japan issue always had been energy and resources. So they can be controlled quite good. Same is reason why US love South Korea or Singapure.

    Even all their WWII actions had been inspired by US who cut the energy.

    China also had been attacked once they run out of resources and their gas and oil imports increase 20-40% per year.

  • Recall the state of affairs in the capitalist countries two and a half years ago. Growth of industrial production and trade in nearly all the capitalist countries. Growth of production of raw materials and food in nearly all the agrarian countries. A halo around the United States as the land of the most full-blooded capitalism. Triumphant hymns of "prosperity." Grovelling to the dollar. Panegyrics in honour of the new technology, in honour of capitalist rationalisation. Proclamation of an era of the "recovery" of capitalism and of the unshakable firmness of capitalist stabilisation.

    ...

    It is laying bare and intensifying the contradictions between the major imperialist countries, the struggle for markets, the struggle for raw materials, the struggle for the export of capital. None of the capitalist states is now satisfied with the old distribution of spheres of influence...

    There can be no doubt whatever that owing to the developing crisis, the struggle for markets, for raw materials and for the export of capital will grow more intense month by month and day by day.

    Means of struggle: tariff policy, cheap goods, cheap credits, regrouping of forces and new military-political alliances, growth of armaments and preparation for new imperialist war.

    There is one branch, however, has not been affected by the crisis. That branch is the armament industry. It is growing continuously, not-withstanding the crisis. The bourgeois states are furiously arming and rearming. What for? Not for friendly chats, of course, but for war. And the imperialists need war, for it is the only means by which to redivide the world, to redivide markets, sources of raw materials and spheres for the investment of capital.

    This means that the danger of war will grow at an accelerated pace.

    Said long time ago.

  • Embargo historically led to real wars. (As VK points out), WW2, Japan invaded China, then marched South to Indochina (Vietnam), US put an energy embargo on Japan, next Pearl Harbor. The US is a $19T economy, China is a $13T economy, there will not be any winner.